Traders slammed the brakes on a rally in shares of Hertz on Wednesday, after the company notified investors of a dispute over its listing on the New York Stock Exchange.
NYSE is moving to delist the company’s stock after the car rental group filed for bankruptcy last month, which put it potentially in breach of the exchange’s rules. Discussing the ruling for the first time, Hertz said it had appealed against the delisting and its stock would continue to trade on the NYSE pending a hearing to decide its future.
The dispute comes at a time when speculative trading has boosted shares in Hertz and other companies that recently succumbed to bankruptcy amid the coronavirus crisis.
“There can be no assurance that the NYSE will grant the company’s request for continued listing at the hearing and whether there will be equity value in the company’s common stock,” Florida-based Hertz said in a filing with the US Securities and Exchange Commission.
NYSE’s manual for listed companies states that the exchange may consider suspending or removing a stock in the event of a bankruptcy.
That has not stopped retail investors placing bets that Hertz and other coronavirus casualties will turn round their businesses amid a resurgent US economy and a recovery in travel demand.
Hertz was up 47 per cent since filing for bankruptcy in late May, as of its closing price on Tuesday. The stock was also trading at seven times its recent closing low of 56 cents on May 26.
It gave up some of those gains on Wednesday, falling as much as 37 per cent.
JC Penney — one of several retailers that entered bankruptcy during the coronavirus shutdowns and which has also drawn the attention of retail investors — also fell sharply on Wednesday, down more than 22 per cent on the over-the-counter market, having more than doubled since the start of June.
“The valuations in equities make no sense and investors are sceptical that risky assets have reached the end of their rally,” said Edward Moya, senior market analyst at Oanda, noting a run-up in gold prices this week as traders became more risk-averse.
“Hertz has erased all their post-bankruptcy losses, while Macy’s has recovered the majority of losses following their recent liquidity concerns and battered consumer due to the coronavirus pandemic,” he added.
Hertz, which had been backed by billionaire investor Carl Icahn, filed for Chapter 11 protection as travel came to a near halt this year. Car rental companies rely heavily on airport travellers to generate revenues and at the height of the pandemic lockdowns, airlines severely curtailed their flights globally.
In filing for bankruptcy, Hertz said Covid-19’s impact on travel demand was “sudden and dramatic, causing an abrupt decline in the company’s revenue and future bookings”.